Tackle the Taxes

The most un-awaited season is here- “The Tax Season”. Tax payers hunt ways to save their money. As much as a layman needs to know about taxation there is no formal system to learn about tax saving.

This makes it extremely difficult for people with non-finance background to understand how to “tackle the taxes”. Also, people aware of how to handle taxes are confused most of the time about which scheme to invest in.

There are various schemes for saving tax one can invest in but they are subjected to market risks in their own way. One has to know their risk appetite before investing.

Many taxpayers typically wake up every year around this time to finalize investments to save their taxes. As the deadline approaches, taxpayers start panicking and sometimes invest in the wrong schemes without thorough research.

The majority of tax-saving investments are made during the last quarter of the year. Instead, invest early and let the idle money grow. Tax saving mutual funds are said to be providing the best returns. Equity Linked Saving Scheme aka ELSS is currently one of the best options to invest. The following are the reasons for the same:

· Invest in ELSS to save tax: Saving tax is the prime reason to invest in ELSS. Investments in ELSS qualify for tax deduction under section 80C of the income tax act of 1961. You can invest in ELSS and deduct up to Rs.1,50,000 from your taxable income to effectively reduce your tax liability.

· Lock-in period (3 years): In most long term investments you are obliged to stay invested for long periods. In fact, the least lock in period is 3 years which is provided by ELSS.

· Has potential for higher returns: As compared to other 80C investments, ELSS offers significantly higher returns. It benefits the investors by compounding in the long run. ELSS provides returns in the range of 15-20% generally. Making it the highest among other tax saving options such as PPF, FD over 5 years, among others.

· Hassle-free and safe investments: ELSS provides ease of investments as you can do it online and the funds are credited in 3-4 working days. As ELSS is under the purview of SEBI the investments are safe and transparent.

· SIP option: ELSS bursts the myth that a huge amount is required to invest and gain profits. The ELSS scheme has the availability of SIP options wherein investors can invest a fixed amount at regular intervals.

ELSS allows the benefits of equity mutual fund schemes to ride the growth cycle of stocks in your ELSS portfolio. In the rising economy like India, a good portfolio with quality stocks may reap higher returns. ELSS surely beats all other traditional tax-saving methods but it is advisable one should consult an investment advisor to choose the right ELSS schemes for you.